DEERFIELD, ILL. – With profitability surging and sales growth slightly lagging targets, Mondelez International, Inc. has stepped up efforts to bolster volume-driven revenue growth, said Irene Rosenfeld, chairman and chief executive officer.
The introduction of Oreo brand chocolate bars in the United States and Milka chocolate in China are among two initiatives Ms. Rosenfeld highlighted aimed at helping Mondelez sustain moderate revenue growth in a challenging macroeconomic environment.
|Irene Rosenfeld, chairman and c.e.o. of Mondelez|
“We’re filling key white spaces by establishing beachheads in key markets,” Ms. Rosenfeld said. “We recently launched chocolate in China, where initial response to our Milka bundle has been very positive. We’re also launching mainstream and premium chocolate in the U.S., where we believe the Oreo and Green & Blacks brands will resonate well with consumers.
“We acquired the license to sell Cadbury-branded biscuits around the world. This will enable us to grow our Cadbury choco-bakery portfolio in more than 100 markets. And in Japan, we launched Oreo, Ritz and Premium biscuits in September, following the repatriation of our brands there.”
Ms. Rosenfeld addressed investment analysts in an Oct. 26 earnings call.
Other steps the company has taken to drive growth include stepping up investments behind Mondelez power brands, selectively investing “to narrow price gaps” when needed and “sharpening connections with our consumers through digital marketing, and innovating to redefine permissible snacking,” Ms. Rosenfeld said.
She said the efforts to date have paid dividends.
“For example, Oreo, belVita and Milka all posted mid to high single-digit growth year to date,” she said. “And we have solid momentum behind our Thins Biscuit platform, which includes innovations like Oreo Thins and Chips Ahoy! Thins on the sweet side, and Good Thins and Ritz Crisp & Thin on the savory side.”
As reported net income in the third quarter plunged from the same period a year ago. The year earlier period included a $7.1 billion gain from transactions connected with the company’s coffee businesses.
Third-quarter net income was $548 million, or 38c per share on the common stock, down 93% from $7,266 million, or $4.52 per share, during the same period last year. Net revenues were $6,396 million, down 7% from $6,849 million.
Adjusted earnings per share in the third quarter, excluding the coffee transactions and other items, rose 42%. The company’s operating income margin was 15.8%, a 220 basis point improvement from the same quarter in 2015.
The company tightened its full year outlook, offering a more guarded projection of adjusted sales growth for the year and a more upbeat forecast of profitability growth.
At 1.6%, net revenue growth for the year compares with the most recent guidance of “about 2% growth.” The 1.6% figure is in line with year-to-date sales growth. Earnings-per-share growth guidance of 25% compares with the most recent forecast of double-digit growth.
“Although our top line is not yet where we would like it to be, year-to-date organic net revenue grew 1.6%, led by our power brands, which were up more than 3%. Importantly, these results reflect a steadily improving contribution from volume/mix,” Ms. Rosenfeld said. “We've continued to aggressively reduce overheads and improve the efficiency and cost structure of our supply chain, while making necessary investments to accelerate growth. As a result, we've been able to expand adjusted operating income margin by 260 basis points.”
In the focus on volume-driven revenue growth, Ms. Rosenfeld said North America has contributed solidly, as has Europe and Asia Pacific.
Mondelez is “expanding our routes to market,” she said to further enhance growth opportunities.
“This includes a significant focus on e-commerce, which grew approximately 40% in Q3,” she said.